UK Asset Resolution Limited (UKAR), the holding company for Bradford & Bingley plc (B&B) and Northern Rock (NRAM), said it concluded a competitive sales process for the sale of an £860 million portfolio of equity release loans to Rothesay Life Plc.

UKAR was established in 2010 to “facilitate the orderly management of the closed mortgage books of both B&B and NRAM to maximise value for taxpayers, while ensuring that both companies continue to treat customers fairly …”

UKAR’s CEO Ian Hares said: “This is another step in the reduction and simplification of our balance sheet.

“When complete, this sale will reduce UKAR’s balance sheet to £13bn, a 90% reduction since formation.

“The transaction delivers against our overarching objective to dispose of assets which protect and maximise value for the taxpayer whilst treating customers fairly.”

UKAR said in a statement: “This portfolio comprises equity release mortgages from the legacy books of NRAM, B&B and Mortgage Express (MX) and is secured on residential property assets in the UK.

“The sale is based on the portfolio position as at 30 April 2018, from which point the purchaser will acquire the risks and rewards of ownership of approximately 6,200 NRAM, B&B and MX mortgages.

“We undertook, with our advisers, an exercise to establish the likely valuation range of these assets to the taxpayer.

“The overall price achieved is at the upper end of this range and these mortgages were sold for a price above their book value.

“Financial completion is expected within the next few weeks at which point the interest rate swaps held against these mortgages to hedge the risk of changes in interest rates will be terminated.

“These swaps were taken out more than ten years ago when the loans were originated in line with good risk management practice.

“Due to the fall in long term interest rates, there is a cost on termination which is expected to exceed the profit on the sale of the loans, resulting in a net overall accounting loss which will be reflected in our interim accounts.

“However, as a result of this transaction we still expect to repay approximately £1bn of the Government loan which is made up of a number of components in addition to the actual sales proceeds.”

UKAR was advised in the process by Perella Weinberg Partners, Milliman and Allen & Overy.